Ed. Note-today I have a joint posting by myself and Jay Martin, Chief Compliance Officer at Baker Hughes Incorporated.
Two of the most common compliance focused committees for public companies are those at the Board level and those which sit between the Chief Compliance Officer (“CCO”) and the Board, usually consisting of very senior executives such as members of a company’s executive leadership team. It is noteworthy, however, that Houston-based Baker Hughes Incorporated (“BHI” or “Company”), which has been highly recognized for its effective global compliance program, has adopted additional compliance committees, with strong support from the senior operations leaders in the organization. These new committees will help the Company’s corporate compliance function to more effectively ensure employee and business partner compliance with the Company’s Code of Conduct (“COC”) throughout its global organization by integrating compliance into every aspect of Company’s functions and generating the necessary information to continuously improve the Company’s Compliance Program. These additional committees also operate on multiple planes to fully operationalize compliance in the Company, augment the Company’s internal controls and make the Company a more efficient and profitable entity. BHI has named these additional compliance committees “GeoMarket Ethics and Compliance Committees” (hereinafter “Committees.”)
As noted above, most companies have a Board Committee dedicated to ethics and compliance or something like a Board Audit Committee which the CCO will report into. Once again, there are many companies with senior executives populating another level of oversight with a compliance committee between the CCO and the Board. However, the BHI initiative, which involves the formation of numerous additional compliance committees (“Committees”) at the regional Geomarket level, helps to create more direct ownership, accountability, and valuable transparency. This moves compliance down into all levels of the Company’s operations. This approach also significantly improves consistency of compliance execution, and helps to ensure that all of Company’s business objectives are achieved in a legally compliant fashion. According to the Company’s Committee Charter, these Committees are designed to “periodically advise and provide information and insights to the CCO (as well as receive compliance information from the CCO and the Ethics and Compliance Director for the relevant GeoMarket) regarding applicable legal and regulatory requirements, industry standards, and the Company’s COC, as well as the Company’s Compliance Program as it relates to the GeoMarket.” The Committee does not have primary responsibility for internal investigations but is charged with reporting any known compliance issues to the CCO should the Committee or a Committee member be made aware of “any matter potentially constituting misconduct or related to legal, financial or HS&E compliance.”
The Committee is designed to “promote clear and frequent compliance-related communication on related matters throughout the GeoMarket and strengthen the Company’s compliance culture. The Committee therefore is very valuable to the overall performance of the Company’s Compliance Program” within the GeoMarket.” This initiative has caused compliance topics to be more thoroughly discussed at regularly occurring Company operations meetings. Also note these Committees have communication structures designed to facilitate communication up the chain and down the chain. They also allow the CCO to have a more direct set of ‘eyes and ears’ closer to the ground. Finally, the Committees give the compliance function greater visibility within the organization because compliance has been moved further into the middle and lower levels of the organization on a daily basis.
One of the key elements of the Committees are their makeup, which is GeoMarket centric. The Committee members are: (a) the Vice President of the GeoMarket; (b) the Ethics and Compliance Director for the GeoMarket; (c) the Legal and Compliance Director for the GeoMarket; (d) the HR Director of the GeoMarket; (e) the Finance Director of the GeoMarket and/or audit personnel located in the GeoMarket; (f) the Trade Compliance Director of the GeoMarket; (g) the Supply Chain Director of the GeoMarket; (g) the Sales Director of the GeoMarket and (h) senior representatives of Operations in the GeoMarket. This composition of the Committees, coupled with their structures, allow compliance to be fully operationalized into the Company’s global organization.
Authority and Responsibility
There are multiple delineated responsibilities for each Committee. Some of these responsibilities include:
- Assisting in identifying not only potential legal and compliance risks in the GeoMarket but also reputational risks to BHI.
- Establishment of goals and metrics to measure against these legal and compliance goals in the GeoMarket.
- Exercising oversight of the implementation and effectiveness of the Company’s global compliance program in the GeoMarket. Additionally, to make recommendations to the CCO and suggest improvements to the Company’s compliance practices in the GeoMarket.
- Reviewing and monitoring implementation of BHI’s COC in the GeoMarket and assisting in the identification of best practices, alternative strategies and local initiatives to enhance the BHI Compliance Program.
- Assuring to the CCO and the senior leaders of operations that compliance goals and requirements are both established and communicated across the Company.
- Advice management of its assessment of the Compliance Program, ethics and compliance risks in the GeoMarket and steps taken to both manage and lessen such risks.
- Reviewing the Company’s Business Helpline complaints and other information to assure the GeoMarket that “appropriate steps are taken to modify the Compliance Program to reduce identified ethics and compliance risks.”
The innovation represented by the formation of the Committees operationalizes compliance into the Company’s GeoMarket operations where the business operates. This sort of approach follows the Department of Justice mandate, articulated in the Department’s FCPA Pilot Program for companies to move the doing of compliance down into the business of the organization. The make-up of BHI’s Committees, while including legal and compliance representatives, is also populated by representatives from other disciplines within the global organization. This allows a fuller, richer and more holistic approach to not only compliance advice but reviews consistent with the Committee’s Charter.
It adds a dimension not often seen or even discussed in the compliance profession. The accountability and oversight down to the GeoMarket level and the compliance monitoring, reviewing, assessing and recommending that is deemed to be necessary will provide additional endorsements up through the organization that it is actually doing compliance. In compliance, it is execution where the rubber meets the road. BHI’s GeoMarket Committee provides a unique structure to perform these functions.
The BHI GeoMarket Compliance Committee adds a dimension not often seen in the compliance profession.Click to tweet
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© Thomas R. Fox, 2016